Beige Book
For use at 2:00 PM EDT
Wednesday
September 2, 2020
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
August 2020
Federal Reserve Districts
Minneapolis
Boston
Chicago
New York
Cleveland
Philadelphia
San Francisco
Kansas City
St. Louis
Richmond
Atlanta
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin
Islands; the San Francisco Bank serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
National Summary
Boston
1
A-1
First District
New York
B-1
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from District
sources.
The qualitative nature of the Beige Book creates an opportunity to
characterize dynamics and identify emerging trends in the economy
that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and informal methods,
the Beige Book can complement other forms of regional information
gathering.
How is the information collected?
Fourth District
Richmond
What is The Beige Book?
Each Federal Reserve Bank gathers anecdotal information on current
economic conditions in its District through reports from Bank and
Branch directors, plus phone and in-person interviews with and online
questionnaires completed by businesses, community contacts, economists, market experts, and other sources.
How is the information used?
The anecdotal information collected in the Beige Book supplements the
data and analysis used by Federal Reserve economists and staff to
assess economic conditions in the Federal Reserve Districts. This
information enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing the outlook for
the national economy. The Beige Book also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses
and community organizations.
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
L-1
This report was prepared at the Federal Reserve Bank of Minneapolis
based on information collected on or before August 24, 2020. This
document summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of
Federal Reserve officials.
National Summary
The Beige Book ■ August 2020
Overall Economic Activity
Economic activity increased among most Districts, but gains were generally modest and activity remained well below
levels prior to the COVID-19 pandemic. Manufacturing rose in most Districts, which coincided with increased activity at
ports and among transportation and distribution firms. Consumer spending continued to pick up, sparked by strong
vehicle sales and some improvements in tourism and retail sectors. But many Districts noted a slowing pace of growth
in these areas, and total spending was still far below pre-pandemic levels. Commercial construction was down widely,
and commercial real estate remained in contraction. Conversely, residential construction was a bright spot, showing
growth and resilience in many Districts. Residential real estate sales were also notably higher, with prices continuing to
rise along with demand and a shortage of inventory. In the banking sector, overall loan demand increased slightly, led
by solid residential mortgage activity. Agricultural conditions continued to suffer from low prices, and energy activity
was subdued at low levels, with little expectation of near-term improvement for either sector. While the overall outlook
among contacts was modestly optimistic, a few Districts noted some pessimism. Continued uncertainty and volatility
related to the pandemic, and its negative effect on consumer and business activity, was a theme echoed across the
country.
Employment and Wages
Employment increased overall among Districts, with gains in manufacturing cited most often. However, some Districts
also reported slowing job growth and increased hiring volatility, particularly in service industries, with rising instances of
furloughed workers being laid off permanently as demand remained soft. Firms continued to experience difficulty finding necessary labor, a matter compounded by day care availability, as well as uncertainty over the coming school year
and jobless benefits. Wages were flat to slightly higher in most Districts, with greater pressure cited among lowerpaying positions. Some firms also rescinded previous pay cuts. Others, however, have looked to roll back hazard pay
for high-exposure jobs, though some have chosen not to do so for staff morale and recruitment purposes.
Prices
Price pressures increased since the last report but remained modest. While input prices generally rose faster than
selling prices, they were moderate overall. Notable exceptions included inputs experiencing demand surges or supplychain disruptions, such as structural lumber, for which prices spiked. Several Districts also reported that costs for personal protective equipment and inputs to it remained elevated. Freight transportation rates rose in several Districts due
to a resurgence in demand. In contrast, contacts in multiple Districts cited weak demand or lack of pricing power as a
factor behind slower growth in retail or other selling prices.
Highlights by Federal Reserve District
Boston
New York
Business contacts continued to cite the disruptive effects
of the pandemic on all aspects of their activity, even as
recovery began or continued in some sectors. Employees of some firms were called back, while others remained on furlough or have permanently lost jobs. The
strength of the region’s housing markets in July provided
some support for contacts’ optimism that the pandemic
merely delayed the usual spring rebound.
Growth in the regional economy has stalled in recent
weeks, with activity still well below pre-pandemic levels.
Retail activity and the single-family housing market have
continued to improve. The labor market remains weak,
and hiring activity has slowed. Selling prices and wages
have been mostly steady, on balance.
1
National Summary
Philadelphia
St. Louis
Business activity was flat during the current Beige Book
period and remained far below levels attained prior to the
onset of COVID-19. Firms continued to face hiring difficulties, and wages trended higher for low-wage jobs.
Prices also trended slightly higher amid ongoing price
spikes. Uncertainty is extremely high as contacts await
layoffs, evictions, foreclosures, and bankruptcies while
the coronavirus persists and the stimulus ends.
Economic activity has increased modestly but was highly
variable across sectors. Auto dealers reported strong
sales, and restaurants reported some improvement.
Tourism and hospitality contacts reported that higher
COVID-19 cases over the past month have reduced
demand. The outlook among contacts remains pessimistic, on net, but has improved slightly since our previous
report.
Cleveland
Minneapolis
The region’s economy grew modestly and at a pace
similar to that of the previous reporting period. However,
activity remained below pre-pandemic levels across
most sectors. Staff levels changed very little and wages
were mostly steady. Price pressures increased somewhat as input costs increased. Contacts expected moderate improvement in customer demand, although expectations have been scaled back.
Ninth District economic activity rose modestly. Job postings rose, but many firms expressed concern about
future demand. Some segments of consumer spending
and tourism saw improvements, while many services
firms reported decline. Despite an overall pullback in
new construction projects, residential building showed
signs of resilience. Crop conditions were strong but
faced low prices, and oil production fell significantly.
Richmond
Kansas City
The Fifth District economy continued to improve in recent weeks, but activity remained considerably below pre
-pandemic levels in most segments. A few notable areas
of strength were auto sales, existing home sales, and
trucking shipments. Employment continued to increase,
but the pace of hiring slowed compared with our prior
report. Price growth picked up but remained modest
overall.
Economic activity strengthened moderately but remained
below pre-pandemic levels in many sectors. Consumer
spending increased moderately, with gains in retail, auto,
restaurant, and tourism sales. Residential home sales
and prices also rose moderately, but commercial real
estate conditions worsened. Manufacturing activity expanded moderately, while conditions in the energy and
agriculture sectors remained weak.
Atlanta
Dallas
Economic conditions were mixed. Labor markets improved modestly, and nonlabor costs were subdued.
Certain retail segments were strong, while others reported softness. Tourism activity remained soft. Residential
real estate conditions improved, and commercial real
estate activity was mixed. Manufacturing activity increased. Banking conditions rebounded slightly.
Increasing COVID-19 infections in the Eleventh District
have disrupted the budding economic recovery in some
sectors. While manufacturing activity continued to expand, service sector activity declined overall in July but
resumed its nascent recovery in August. Energy activity
remained depressed. Sharply rising home sales were a
bright spot. Outlooks were increasingly uncertain, as
surging COVID-19 cases disrupted business sentiment.
Chicago
San Francisco
Economic activity increased strongly, but the pace of
growth slowed, and activity remained below prepandemic levels. Employment and manufacturing increased strongly, consumer spending and construction
and real estate increased moderately, and business
spending increased slightly. Wages increased slightly,
and prices rose modestly. Financial conditions improved
modestly. The pandemic continued to weigh on agriculture.
Economic activity in the Twelfth District expanded slightly. Employment levels increased marginally. Price inflation remained generally unchanged. Sales of retail goods
rose slightly, while conditions in the consumer and business services sectors remained precarious. Activity in
the manufacturing sector increased modestly, and the
agriculture sector remained weak. Residential construction activity picked up briskly, while activity in the commercial market increased a bit. Lending activity ticked up
further.
2
Federal Reserve Bank of
Boston
The Beige Book ■ August 2020
Summary of Economic Activity
Business activity continued to pick up modestly in the First District in July and early August, even as some sectors saw
little improvement. Some retailers cited strong activity, while air travel and hotels remained very soft. Manufacturing and
staffing results were similarly mixed, with results largely a function of the pandemic’s effects on the sectors of the firms’
clients or customers. Residential real estate markets have begun to recover from the pause this spring. Commercial
markets were split, with the retail and office sectors still very weak and warehouse and lab space robust. Outlooks continued to be highly uncertain, with more respondents expecting at least mild improvement than predicting increased
losses.
throughout the state. A furniture retailer reported average weekly sales up 30 percent compared to last summer, with weekly online sales up more than 300 percent
compared with the same weeks in 2019 and in-store
sales roughly one-third of pre-pandemic levels.
Employment and Wages
Employment changes were mixed. Retail contacts selling
autos and furniture brought back almost their entire
workforces after layoffs and furloughs in the spring. By
contrast, many hotel workers remained furloughed,
particularly food and beverage staff that typically work
larger functions. Similarly, an aviation and auto industry
supplier furloughed large numbers of employees and
recently announced an 8 percent permanent staff reduction. Some manufacturing contacts giving “hazard pay”
to employees said they planned to stop doing so, but
one said that they would continue the practice for fear of
damaging morale. Staffing firms also noted that hazard
pay for some jobs had been eliminated. Some clients of
staffing firms raised pay compared to pre-pandemic
levels to enhance recruitment.
Restaurants across Massachusetts dramatically increased outdoor dining options. Over one-third of restaurant sales came from outdoor dining, which is unusual in
Massachusetts where fewer than 20 percent of restaurants had outdoor dining options before the pandemic.
Restaurants in coastal areas operated at around 75
percent of their usual sales, on average, while those in
Boston were faring worse than the rest of the state.
Travel industry contacts reported hotel stays continued
to be impacted significantly by the pandemic, with occupancy rates in Boston remaining under 20 percent.
Some hotels will be housing college students for the fall
semester to alleviate density in dormitories. Conventions
scheduled into the first quarter of 2021 in Boston have
been postponed. Air traffic into Logan remained low, with
reductions of more than 85 percent in domestic passengers and more than 95 percent in international travelers.
Prices
Contacts again said little about prices. Manufacturing
contacts continued to report a benign pricing environment. A milk producer said raw milk prices were very low
due to decreased demand from restaurants.
Retail and Tourism
Manufacturing and Related Services
Respondents continued to report major disruptions related to COVID-19, though some noted improvements
since the spring. After limited in-person shopping, car
sales in Connecticut were strong throughout June, July,
and the start of August, except for the week that remnants of Hurricane Isaias caused power outages
Experiences diverged markedly across the ten manufacturing firms contacted this cycle. Firms with exposure to
home goods, semiconductors, and health care reported
strong results, even compared with a year ago, while
firms with exposure to aviation and automotive continued
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Federal Reserve Bank of Boston
to suffer. A manufacturer and retailer of furniture reported that sales in the summer were up 30 percent year-onyear. Semiconductor firms reported significant increases
in sales which they attributed to demand for devices and
the upcoming release of a new iPhone. By contrast, a
firm that makes parts for jet engines reported that sales
were down 60 percent; OEM demand was down and
aftermarket demand more or less vanished as airlines
were not using their planes and were also trying to
conserve cash.
leases, and tenants sought renewals of only 1 to 3 years’
duration. The supply of office space for sublease increased by a significant margin, with the office vacancy
rate in downtown Boston—including sublease supply—
rising to an estimated 11 percent in August from roughly
6 percent in March. Office asking rents were steady, but
effective rents declined amid increased leasing concessions. Office sales transactions were close to zero and
office construction was limited to projects that were
underway before the pandemic.
One manufacturer said that they were increasing capital
expenditures both because of discounts on capital goods
and because they wanted to be in position to take market share when the economy recovers. Other firms said
they faced COVID-related delays in construction or
acquisition of capital goods. The commercial aviationrelated contact cut capital expenditures substantially.
The District’s industrial property markets saw continued
robust demand, as online retailers further expanded their
warehouse and distribution space. Demand for laboratory space in greater Boston stayed very strong; one contact raised concerns of a potential glut of lab space when
planned projects are completed. The retail sector remained weak apart from grocery-anchored shopping
centers and pharmacies; contacts cited an uptick in
closures of small businesses. A regional lender to commercial real estate saw steady loan volume as well as a
modest increase in requests for loan payment deferrals.
Contacts said they expected current performance,
whether good or bad, to continue in the near term.
Staffing Services
New England staffing firms reported mixed business
results into August, reflecting their different industry
exposures. Firms that provide services to COVID-related
industries, particularly healthcare, continued to see
improvement and business growth since the spring. Most
contacts indicated that labor demand is the same as or
higher than in the spring. Some client organizations
called back temporary workers whose jobs could not be
done remotely; some moved from entirely virtual hiring to
conducting the last round of interviews on-site.
Contacts expected commercial real estate activity to stay
flat or decline further for the remainder of 2020 and
expressed a very uncertain outlook for 2021. Some were
concerned that commercial bankruptcies and foreclosures would accelerate in coming quarters without renewed fiscal stimulus measures.
Residential Real Estate
Residential real estate markets in the First District began
to pick up in July, following slow sales this spring due to
the outbreak of COVID-19. (Boston and Vermont reported year-over-year changes from June 2019 to June
2020. Connecticut data were unavailable. The other four
New England states reported statistics through July.)
Closed sales for single-family homes increased for all
areas reporting July statistics. Condo sales increased in
July in New Hampshire and Maine, and decreased by
about 1 percent in Rhode Island and Massachusetts.
Across the region, contacts were optimistic that sales
activity would continue at a high level into the fall.
Labor supply was described as complex. The majority of
contacts reported difficulty finding candidates who were
willing to work, especially for pay rates that might be
lower than pandemic-augmented unemployment benefits. A lack of access to daycare and unwillingness of
some working parents to send their children to daycare
contributed to a reduced pool of candidates. By contrast,
one contact saw increased applicants, citing recent
layoffs and furloughs as driving factors.
Overall, respondents remained cautious about the uncertainty of the COVID situation and the upcoming election.
The majority of contacts were somewhat more optimistic
than three months ago, but a few were less optimistic
and expected business activity to slow in Q3 and Q4.
Markets continued to favor sellers. Inventory decreased
for both single family homes and condos in all reporting
areas, with all markets except the Boston condo market
experiencing double-digit drops. Median sales prices
rose in all markets except for Boston condos. Additionally, both the Massachusetts and Boston contacts noticed
increased moves from urban to suburban locations,
which they attributed in part to the pandemic.■
Commercial Real Estate
Around the First District, the office and retail property
sectors experienced ongoing weakness while markets
for warehouse and lab space remained robust. Office
leasing activity remained limited to renewal of expiring
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ August 2020
Summary of Economic Activity
Economic growth in the Second District economy has stalled in the latest reporting period, even as the spread of the
virus has remained subdued and more businesses have gradually reopened. Employment overall has been little
changed, though retailers and wholesalers have reported staff increases, as more restrictions have been lifted. Input
prices accelerated somewhat, while selling prices have remained steady. Retail activity continued to expand, though it
remains well below pre-pandemic levels, while tourism and travel have remained depressed. Home sales have been
mixed, with the single-family sales market strengthening but other segments flat to weaker. Commercial real estate
markets have softened further—particularly for office and retail space. Residential and commercial construction activity
has remained weak. Finally, banks reported increased loan demand, tighter credit standards, and further widespread
increases in delinquency rates. Overall, business contacts have become less optimistic about the near-term outlook.
mation, and wholesale trade, but increases in retail, real
estate, and construction. Looking ahead, businesses
generally expect wages to remain steady.
Employment and Wages
The labor market has been generally flat since the last
report, though retailers and wholesalers indicated that
they had added staff as more restrictions have been
lifted. A major upstate New York employment agency
and a payroll processing firm both reported that hiring
activity has picked up somewhat since midyear. However, a major New York City agency specializing in office
jobs indicated that hiring has remained sluggish, as
fewer people are leaving jobs and companies have been
reluctant to on-board new workers remotely. These
contacts noted a marked increase in job seekers.
Prices
Business contacts reported that input costs accelerated
slightly, rising at a moderate pace, while selling prices
were mixed but, on balance, little changed. While contacts in the finance and professional & business service
sectors reported declines in selling prices, retailers noted
some escalation in prices for the first time since the
outbreak began in March, reflecting widespread increases in input costs. Notably, businesses in the leisure &
hospitality and retail & wholesale trade sectors were
somewhat more inclined to raise prices in the months
ahead.
Some businesses have noted less trouble bringing back
furloughed workers and hiring new ones in recent weeks,
as unemployment benefits were scaled back. However,
a number of companies noted that concerns about child
care and the upcoming school year remain constraints
on worker availability.
Consumer Spending
Retailers generally reported that sales, though still down
substantially from a year ago, picked up in July and into
August, as restrictions were lifted further. However,
some reported softening in revenues in mid-August. A
number of retail contacts mentioned difficulties in getting
supplies on time. Some have also noted that safety
concerns and capacity restrictions have limited customer
traffic.
Business contacts have mixed expectations about their
likely staffing levels in the months ahead. While more
manufacturers said they anticipated staff increases than
reductions, the reverse was true among service sector
businesses—especially those in the information, transportation, and warehousing industries.
Wages have generally been mixed but mostly steady, on
balance, with declines in leisure & hospitality, infor-
New vehicle sales softened in the latest reporting period,
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Federal Reserve Bank of New York
for single-family homes—have generally continued to
show strength.
following a fairly strong rebound in May and June, according to dealers in upstate New York. This recent
pullback is partly attributed to low inventories and reduced incentives, though inventory levels are expected
to improve in the fall. Sales of used vehicles have remained strong in recent weeks, with no significant inventory problems reported. Credit conditions were reported
to be in good shape.
New York City’s rental market has been particularly
weak, with vacancy rates reaching multi-year highs in
Manhattan and rents down roughly 10 percent from a
year ago with increased landlord concessions. Rents
declined more moderately in Brooklyn and Queens, and
were little changed in the Bronx and across outlying
portions of the metro area. The single-family rental market has been relatively strong across much of the District.
Manufacturing and Distribution
Manufacturing growth has slowed to a crawl in the latest
reporting period, while activity in the wholesale trade and
transportation & warehousing sectors has contracted
modestly. A number of contacts in these sectors have
noted difficulties and delays in getting a variety of inputs.
The residential sales market has been mixed. Sales of
condos and co-ops in New York City have rebounded
modestly from depressed spring levels, while prices
have fallen, as the number of listings has swelled. Elsewhere across the District, though, home prices have
risen and bidding wars have been common, reflecting
strong pent-up demand and a dearth of homes on the
market, which has also restrained sales volume.
Looking ahead, manufacturers projected moderate
growth in activity, while wholesalers and transportation &
warehousing contacts anticipated little change. Businesses’ overall capital spending plans remain depressed, though there have been scattered reports of
companies investing in air filtration systems and other
such equipment to enhance safety.
Commercial real estate markets have weakened further.
Office availability rates continued to rise, while rents
were flat or declining. Retail rents have also been flat to
lower, as vacancy rates have risen to multi-year highs.
Services
Service industry contacts generally reported that business activity has weakened since the last report and
remains well below pre-pandemic levels. Information and
professional & business services firms reported fairly
widespread declines in activity, while those in leisure &
hospitality and education & health reported flat to modestly declining activity. The falloff in economic activity in
central business districts, most notably Manhattan, has
distressed local businesses that provide services to
offices and workers, as well as firms throughout the
metro area that service them. Contacts at both business
service and consumer service firms generally anticipated
little change in business activity the months ahead.
New construction activity has remained quite sluggish
and well below year-earlier levels, though a few areas
have seen a pickup in multifamily construction starts.
Contacts in real estate and construction have become
less optimistic, on balance, about the near term outlook.
Banking and Finance
Finance sector contacts generally noted continued weak
business and have grown more pessimistic about the
near term outlook. Small to medium-sized banks across
the District reported higher demand for consumer loans,
residential mortgages, and commercial mortgages, but
flat demand for commercial and industrial loans and little
change in refinancing activity. Bankers reported tightened credit standards across all loan categories except
consumer loans, where standards were unchanged.
Banks reported narrowing spreads across all loan categories and lower average deposit rates. Delinquency
rates rose across all categories—particularly on residential mortgages—though banks continued to report more
lenient policies for delinquent accounts across all categories. ■
Tourism has remained depressed, with New York City
hotels still running at well under half capacity, though
weekend occupancies have increased. Hotels have also
seen some business as homeless shelter alternatives.
Ongoing restrictions on capacity, as well as trepidation
among customers, have restrained business at restaurants, hotels, and other providers of consumer leisure
and recreation services. A large expansion in outdoor
dining has helped mitigate New York City’s ongoing ban
on indoor dining, though many restaurants have still
seen sizable reductions in overall capacity.
Real Estate and Construction
Housing markets across the District have continued to
diverge, as New York City’s sales and rental markets
weakened further, while markets elsewhere—particularly
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ August 2020
Summary of Economic Activity
Third District business activity changed little overall during the current Beige Book period and remained far below levels
observed prior to the onset of the COVID-19 pandemic. Business operations increased incrementally, as COVID-19
caseloads remained at relatively low levels throughout the period. As firms recalled more of their workforce, net employment also grew modestly; however, firms also continued to issue permanent layoffs. Some wage increases were noted
among lower-paying jobs. Meanwhile, contacts reported ongoing difficulties attracting workers. Prices edged higher
again amid continued spotty price spikes. Firms maintained modestly positive expectations for growth over the next six
months; however, uncertainty is extremely high, as contacts worried about the end of stimulus measures, pending
layoffs, and an inevitable rise of evictions, foreclosures, and bankruptcies. Looming over all is the active presence of the
coronavirus.
Employment and Wages
higher wage and benefit costs per employee was higher
than the percentage reporting lower costs. Manufacturers anticipate compensation costs to rise 3 percent over
the next year – a bit higher than last quarter.
Employment increased modestly overall as firms
stepped up hiring and recalling workers; however, layoffs
continued as well. Among firms in our COVID-19 survey,
25 percent reported that they had hired new workers in
July, and 13 percent recalled furloughed workers. Meanwhile, about 6 percent of the firms had laid off workers
permanently, and another 6 percent had furloughed
workers. However, at mid-August, a slightly greater
percentage of firms reported that employment had declined over the month than had increased.
Several firms maintained previously imposed salary cuts
on higher-paid positions, but further cuts were not reported. Upward wage pressure is most evident for lowerwage jobs, especially for Pennsylvania firms that are
paying closer to the federal minimum than to the $15 an
hour, or more, being offered by many warehouses. Also,
some firms found it difficult to end the temporary “hero”
pay and have made all or part of it permanent.
Staffing firms reported that activity continued to increase
but remained below pre-pandemic levels by as much as
30 percent. Staffing contacts noted far more orders than
they can fill with available labor, and they worried – as
the school year neared – that childcare issues will further
reduce the labor supply. A lack of childcare was also the
only impediment cited by a greater percentage of firms in
our COVID-19 survey in late July than in early July. Fear
of infection and expanded unemployment benefits had
become lesser concerns. From a separate July survey of
Philadelphia’s Center City offices, a vaccine was the
overwhelming factor that firms required for a return from
remote work; safer transit was a distant second.
Prices
Prices edged higher again, as more contacts reported
higher prices rather than lower during the period, except
for prices received by nonmanufacturers. However, over
60 percent of all firms noted no change in prices.
Contacts continued to describe spotty price surges as
demand shifts, production disruptions, and logistics
problems have created scarcity, delays, and price hikes
for an ongoing parade of commodities. Scarcity and high
prices for lumber continued to plague builders.
Manufacturing
Wages appeared to trend slightly upward. In mid-August,
the percentage of nonmanufacturing firms reporting
On balance, manufacturers reported little or no change
in activity during the current period. In our COVID-19
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Federal Reserve Bank of Philadelphia
survey, manufacturing firms began the period with sales
and new orders of about 11 percent below what had
been anticipated pre-pandemic. Firms reported that
demand was about 14 percent below expectations as of
the end of July.
Banking contacts continued to report that government
stimulus and moratoriums on evictions and foreclosures
had worked well for most households and businesses.
Many creditors have already resumed payments. However, there was universal concern about the outcome
once stimulus measures and protections end.
In contrast, positive but low diffusion indexes for shipments and for new orders from a mid-August survey
suggested the possibility of slight growth. However, both
indexes had fallen since mid-July, indicating that growth
was less widespread among firms and that the overall
direction of change was less certain.
Accountants and attorneys agreed. With moratoriums in
place on foreclosures and evictions, the most serious
consequences, thus far, had been a rise in corporate
bankruptcies, especially in retail and hospitality. There
were also reports of small business closings, but these
are difficult to catalog and some simply shut their doors
without leaving a trace. However, they expect a wave of
foreclosure/eviction cases when the moratoriums end.
Consumer Spending
On balance, nonauto retail sales leveled off over the
period – remaining below expectations by 5 to 20 percent, depending on the retail segment (restaurants would
be lower). Contacts continued to note some pickup in
market share as some of their competitors had closed
permanently. Most restaurants are cobbling sales together from a mix of sit-down dining, takeout/delivery, catering, and groceries. A heavy reliance on outdoor seating
has contacts nervous as colder weather approaches.
One attorney noted that banks were working with clients
to form new payment plans. However, he said that collection rates have gone down significantly and “at some
point, defaults need to happen.” Attorneys and accountants worried that clients were too complacent – believing
that another round of assistance would occur. Others
noted that increasing numbers of apartment tenants and
small businesses had begun skipping payments. Several
contacts at one law firm agreed that “this is a disaster
waiting to happen.”
Demand remained strong for auto sales; however, low
inventories kept new car sales steady at levels about 15
percent below the prior year. However, prices rose and
used car sales were strong, so dealer profits were also
stronger and sometimes record-setting.
Real Estate and Construction
Homebuilders reported modest growth in sales activity
that has kept contractors busy at levels comparable with
recent years and created problems securing lumber and
labor. Existing home sales grew moderately – July sales
had returned to levels comparable with the prior year.
Contacts described very strong demand – driven by low
interest rates and well-heeled consumers searching for
more space. However, inventories continued falling,
driving prices higher and constraining potential sales
growth.
Tourism picked up slightly, following a partial recovery
last period. However, overall activity was about 40 percent below prior-year levels. Contacts described good
activity at open-air resort destinations but still less than
in recent years. Attractions, business travel, and urban
destinations remain depressed.
Nonfinancial Services
Nonmanufacturers reported a slight increase in activity,
but levels remained well below pre-pandemic expectations. In our COVID-19 survey, nonmanufacturing firms
began the period with demand about 23 percent below
what had been anticipated; this improved slightly to 21
percent below expectations as of the end of July.
Philadelphia’s commercial real estate construction grew
modestly and leveled off at about 15 percent below the
level of activity anticipated before the pandemic. Crewsize reductions for worker safety are the primary reason,
but the pipeline for projects beyond the first quarter of
2021 is thin. Commercial office leasing activity declined
slightly, as firms continued to delay decisions while many
workers remain remote and potential layoffs lie ahead.
Demand remains strong for warehousing and positive for
life science activities, but weak for retail space. ■
Financial Services
The volume of bank lending continued to hold steady
over the period, in contrast to the same period in 2019,
during which loan volumes continued growing moderately. Residential mortgages grew moderately during the
period, and auto loans and commercial real estate lending grew modestly. However, these gains were offset by
moderate declines in commercial and industrial loans.
Credit card volumes continued falling moderately; last
year, they rose moderately over the same period.
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ August 2020
Summary of Economic Activity
The Fourth District’s economy grew modestly and at a pace similar to that of the previous reporting period. However,
sales and activity generally remained below pre-pandemic levels across most sectors. Staff levels changed very little in
all sectors, even as business activity continued to increase. Consequently, wages were mostly steady. Input cost pressures increased somewhat as prices for construction materials, metals, and materials used in pandemic-related medical
equipment rose. Selling prices rose moderately as some of those costs were passed through to customers. Moreover,
strong demand and low inventories helped to push up prices for vehicles and homes. Looking ahead, contacts expected
moderate improvement in customer demand, although expectations have been scaled back since the previous reporting
period because of the uncertainty of the coronavirus’s path. Contacts expected to add staff slowly in the months ahead,
and the majority of firms believed that by next spring, their staff levels would still be below pre-pandemic levels.
Employment and Wages
few firms reported that professional staff whose wages
had been previously cut have had those wages restored.
Labor demand remained weak, and staff levels changed
by little in all sectors, even as business activity increased. Fewer firms reduced staff levels in the past two
months than in the previous period. However, only about
one-fourth of contacts added workers, a share which
was unchanged from the previous period. Firms noted
that the weak level of customer demand was the primary
reason for their lackluster hiring activity. Although the
labor market is more stable than it was during the spring,
a few firms reported that previously furloughed workers
have recently been laid off permanently—a sign that the
labor market’s recovery may not be smooth. Contacts
expected to add staff slowly, and the majority of firms
believed that by next spring their staff levels would still
be below pre-pandemic levels. Most believed customer
demand would not be strong enough to support prepandemic staff levels, but a sizeable minority noted their
firms had become more efficient and did not need as
many workers as they had at the beginning of the year.
Prices
Nonlabor costs rose modestly after they had been flat or
slightly lower in the prior two reporting periods. Construction firms widely reported that shortages of materials had
caused input costs to rise. This was especially true of
lumber. Manufacturers noted that prices rose for materials that were in limited supply and were also used for
medical equipment, such as plastics or materials used in
masks. Price increases for certain metals such as zinc,
copper, and aluminum were also reported. Multiple firms
in construction, manufacturing, and retail reported higher
operating costs because of increased expenditures for
personal protective equipment, extra sanitation
measures brought about by COVID-19, and, in some
cases, staggered shifts.
Selling prices rose modestly, although there was variation across sectors. Most firms held their prices unchanged because of weak demand. Among sectors in
which price increases were noted, higher materials costs
boosted new-home prices. Auto dealers commented that
low inventories of vehicles were pushing up prices for
new and used cars. Further, transportation firms noted
that increased cargo volumes gave them enough pricing
Wages were mostly steady, with 8 out of 10 firms reporting no change in the past two months and with fewer
firms cutting pay. Where pay increases were noted, a
number of staffing agencies reported that before enhanced unemployment benefits had expired, the benefits
motivated them to raise wages to attract workers. Also, a
D-1
Federal Reserve Bank of Cleveland
power to raise their prices.
ty to remain at its current high levels in the near term.
Consumer Spending
By contrast, nonresidential real estate activity weakened.
Builders reported diminished backlogs of new public
projects, a situation which they believed could be a result
of constrained government budgets. Demand for privatesector projects was reportedly flat, and contacts expect
little improvement given the economy’s uncertain path.
Moreover, commercial real estate developers expressed
concern that a rising number of mall tenants could be
insolvent if economic conditions do not improve soon.
Most retailers reported an increase in consumer spending since the last report. However, demand remained
below its pre-pandemic level, and sales growth lost
momentum in July. Auto dealers indicated that sales had
increased significantly in June, although some momentum was lost in July because of unusually low inventories
caused by factory shutdowns in the spring. Similarly, one
large department store reported that sales plateaued in
July. Furthermore, an apparel retailer commented that it
did not see the usual boost to sales during the back-toschool season because many schools were planning to
go virtual. Most restauranteurs reported that carryout
and delivery orders continued to be strong, but the number of dine-in customers remained very low. Hoteliers
noted there was some improvement in occupancy relative to that of a few months ago, but the lack of business
travel and group events were major drags on the sector’s
recovery. Looking ahead, contacts expressed uncertainty regarding the outlook for consumer spending, citing
the path of the virus, future of fiscal stimulus, and reopening of schools as major unknowns.
Financial Services
Banking activity softened during the reporting period.
Contacts noted that demand for business loans declined
as the Paycheck Protection Program wound down. This
decrease was partially mitigated by strong demand for
purchase mortgages, mortgage refinancing, and auto
loans. Delinquency rates of commercial and consumer
loans remained relatively low because of forbearance
agreements and various fiscal relief measures. However,
if the economy remains weak, most contacts expect
delinquencies to rise as consumer and commercial deferral programs end. Bankers were uncertain about the
future, particularly because of the lack of clarity about
future government stimulus and the path of the coronavirus.
Manufacturing
Manufacturing activity improved slightly, although there
was variation in performance and production remains
below pre-pandemic levels. Steelmakers saw a boost to
sales from the growth in auto production and from customers who were making purchases that had been delayed. Food and beverage producers also noted growth,
thanks to continued growth in consumer spending. Also,
strength in residential construction boosted demand for
electrical equipment used in homes. However, demand
in the aerospace sector continued to decline, as air
travel remains weak. Moreover, a sizeable share of
producers that serve a range of markets reported that
uncertainty about the economic outlook had caused their
customers to either reduce or delay their orders for capital goods. On balance, contacts expect demand to improve slowly over the next few months, although expectations have been scaled back since the previous period.
Professional and Business Services
Most professional services firms reported stronger business activity. IT firms experienced strong demand as
firms adapted to a virtual work environment. Demand for
payroll processing increased as more businesses reopened, and the continued shift toward online purchases
heightened demand for transaction authentication services. An accountancy firm with a national footprint noted
that deal flow had improved. Similarly, a large consultancy reported some clients restarted longer-term projects
that were previously put on hold. Contacts expect demand to remain on a positive trajectory.
Freight
Demand for freight services grew moderately, thanks to
improved manufacturing production and continued
growth of consumer spending. A number of contacts
reported that ongoing shortages of trucks made it difficult
to meet customer demand. Moreover, the variation of
businesses’ reopening across states made it difficult to
anticipate where trucks are needed. Contacts expect
demand for transportation service to remain stable in the
coming months. ■
Real Estate and Construction
Homebuilders and realtors widely reported that activity in
the housing market continued to be strong. According to
contacts, low mortgage rates and tight inventories of
homes spurred home sales by creating a sense of urgency among homebuyers. Realtors noted that the low
level of housing inventory also helped to boost prices.
Renovation activity was reportedly strong as more homeowners expect to work from home for an extended time.
Residential builders and real estate agents expect activi-
For more information about District economic conditions visit:
www.clevelandfed.org/region
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ August 2020
Summary of Economic Activity
The Fifth District economy continued to expand in recent weeks, but activity remained below pre-pandemic and yearago levels. Manufacturers experienced a moderate increase in new orders and shipments, on balance, but demand was
described as unreliable and varied across different goods. Ports saw a modest rise in both imports and exports, but
volumes were comparatively low. Trucking companies reported robust growth in demand, particularly for pharmaceuticals, food, beverages, retail and industrial shipments. Much of retail shopping remained weak, particularly at brick and
mortar stores. Auto sales, on the other hand, were strong. Travel and tourism activity improved slightly as short-term
renting showed some strength. Residential home sales increased robustly and although the inventory of homes for sale
increased recently, there were more potential buyers than homes available for purchase. Commercial real estate leasing
was little changed, overall, although retail vacancies rose. Financial institutions reported strong demand for home purchase loans and mortgage refinancing but a modest decline in lending for business investment. Overall, demand for
nonfinancial services increased slightly, but reports varied. Some firms said that workplace safety measures led to increased costs. Employment continued to increase, but the pace of hiring slowed and many businesses report having
difficulty filling open positions. Price growth picked up in recent weeks, but remained modest, overall.
Employment and Wages
Manufacturing
Employment in the Fifth District continued to rise in
recent weeks, but the pace of hiring slowed compared to
our previous report. There were several reports of employers having difficulty filling open positions. Some
contacts cited skills mismatches as a barrier to finding
the workers they needed while others believed that the
generous unemployment insurance benefits had discouraged workers from applying for available jobs. Also,
multiple contacts said that some former employees were
recalled but did not report back to work. Many firms said
they were trying to figure out how to provide flexibility to
workers with children schooling at home. On balance,
wages were unchanged.
Fifth District manufacturers reported a moderate increase in shipments and new orders since our last report. Several contacts said that demand was unreliable
while others expressed concerns about growing uncertainty relating to COVID and the upcoming presidential
election. Manufacturers of food and home goods such as
furniture reported strong business, but some manufacturers further up the supply chain struggled as uncertainty
led to caution among customers and reduced orders.
Several companies reported that supply chain disruptions were restricting production and that tariffs on inputs
were hurting profits.
Prices
Fifth District ports saw a modest increase in shipments
since our last report, but volumes remained below yearago levels. Import volumes exceeded export volumes in
recent weeks, but exports were down less over the year
than imports. Auto shipments increased but were generally weak on both the import and export side. Imports of
retail goods increased, but imports of machinery, farm
equipment, and manufacturing inputs were low. On the
export side, shipments of apparel and agricultural products rose while metal exports were down. An airport saw
strength in cargo, as an increase in medical supplies and
Ports and Transportation
Since our previous report, price growth picked up but
remained at a modest rate, overall. According to our
most recent surveys, manufacturers reported a rise in
prices paid and prices received; both of which remained
below two percent. Service sector firms, on the other
hand reported a slight increase in prices paid and a
slight decline in prices received. Energy and agriculture
commodity prices generally remained at low levels.
E-1
Federal Reserve Bank of Richmond
diversity of product offset weakness in auto shipments.
stores and restaurants was particularly soft and was
expected to worsen with potential closures in the coming
months. Office leasing held fairly steady, with tenants
asking for short-term lease renewals, but there was not
much new interest or construction in office space. Rental
rates for retail and office were fairly stable, but many
tenants were unable to pay rent in full due to cash flow
issues. Multifamily leasing varied across markets as
some urban areas saw falling rental rates and increasing
concessions, while suburban areas had rising rental
rates.
Trucking volumes had strong growth in recent weeks.
Contacts reported strength in pharmaceuticals and food
and growth in retail, wine, and industrial shipments.
Volumes of budget-friendly goods that have risen during
the pandemic remained high. As demand strengthened,
spot market rates rose, and driver shortages created
capacity constraints. One executive reported buying
new trucks due to strong demand. Despite strong business right now, other truckers expressed concerns over
economic uncertainty from the pandemic and political
uncertainty in an election year.
Banking and Finance
Overall, loan activity improved slightly for this period,
driven primarily by strong demand for both home purchase and mortgage refinance loans. However, the
respondents indicated a modest decline for conventional
commercial lending, due to continued uncertainty for
capital investment as a result of the prolonged COVID
pandemic. Additionally, some financial institutions reported tightening underwriting standards in selected commercial sectors. Deposits grew moderately this period,
despite lower rates on interest-bearing accounts, mainly
due to federal aid disbursements. Credit quality remained excellent, but a few financial institutions reported
a slight increase in delinquencies.
Retail, Travel, and Tourism
Retail demand was little changed in recent weeks, remaining at low levels overall. Customer traffic was low,
and brick and mortar stores saw low demand, as the
market shifted toward online sellers. Retailers cited
COVID and civil unrest as deterrents to in-person shopping. Auto dealers reported strong demand, particularly
online. Auto prices were high, boosting profits. Grocery
stores also saw strong demand, but profit margins tightened due to increased cleaning costs.
Travel and tourism grew slightly since our last report but
generally remained weak. Hotel occupancy was improved over recent months but down significantly over
the year. However, short-term rentals did fairly well as
people looked for more secluded vacations or enjoyable
places to work remotely. Travel was mostly by car, but
tourists were willing to drive longer distances. Beaches
had strong visitation, but museums and other indoor
attractions were closed or saw weak visitation. Indoor
capacity limits led restaurants to expand outdoor seating, making demand more dependent on weather. Business travel remained low, and venues reported little to
no demand for conferences or events.
Nonfinancial Services
Nonfinancial services firms indicated a slight increase in
demand in recent weeks, but individual reports varied
considerably. Business that rely on events and in-person
visits with clients, for example, reported very low levels
of sales and revenue. Firms that provide services
through federal government contracts, on the other
hand, noted an increase in COVID-related contracts. A
few businesses said that while their primary concern was
the safety of their customers and employees, the additional safety measures were costly. ■
Real Estate and Construction
Fifth District home sales increased robustly in recent
weeks. Some realtors reported record months. Homes
for sale rose from a few months ago, and demand continued to surge. Customer traffic increased, and customers were serious about buying. Days on the market fell,
as many houses were bought sight unseen and some
sold in hours. Home prices rose across most locations
and price levels. Realtors attributed much of increased
demand to low interest rates and to a desire to move
from urban to suburban areas for larger homes with
land.
Commercial real estate leasing held fairly steady since
our last report. Industrial leasing remained strong, but
retail leasing was weak, as vacancies rose. Leasing to
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ August 2020
Summary of Economic Activity
Reports on economic activity in the Sixth District were mixed. Labor markets continued to modestly improve as firms
slowly recalled workers. Nonlabor costs remained muted. Retail contacts reported continued strength in the home improvement and renovation segment, but softness in apparel sales. Auto dealers noted sales increased since the previous report. Tourism and hospitality activity remained soft. Residential real estate continued to strengthen, however,
commercial real estate markets remained challenged. Overall manufacturing activity accelerated somewhat, though new
orders and production levels varied across firms. District financial institutions reported that loan growth slowed, underwriting standards tightened, and loan loss reserves increased.
Employment and Wages
testing, and sanitation practices to protect employees
and customers from COVID-19 were notable, and rising
shipping costs affected some industries, though neither
of these costs were reportedly passed through. On balance, food prices stabilized, but shortages of some
products caused prices to increase. The Atlanta Fed’s
Business Inflation Expectations survey showed yearover-year unit costs increased, on average, to 1.5 percent in August, up from 1.1 percent in July. Year-ahead
expectations remained steady at 1.7 percent.
Although labor conditions improved modestly since the
previous report, payrolls remain below pre-COVID levels
and the outlook for further improvements was less certain. Firms continued to slowly recall workers as demand
returned. However, many contacts noted that some prior
staff cutbacks were permanent, and others had used
attrition to reduce headcount. Among those hiring, most
indicated that the pool of available workers was ample,
although there were reports that unemployment insurance benefits continued to present challenges attracting
low-wage workers. Several contacts reported that employees quarantined while waiting for COVID-19 test
results was disrupting operations. Many employers also
expressed growing concern about workers’ abilities to
balance workloads with the demands of childcare and a
return to school or virtual learning environments.
Consumer Spending and Tourism
District retail contacts reported continued strong demand
in the home improvement and renovation segment.
Clothing retailers noted lower year-over-year sales. Auto
dealers reported continued increases in sales since the
last report, as consumers focused on personal mobility
versus shared transportation because of COVID-19.
Reports on wages and compensation varied among
contacts. Some businesses rescinded salary cuts, while
others maintained pay cuts, froze salaries, or eliminated
bonuses and/or contributions to 401K plans. Wage increases remained concentrated at the low-end of the pay
scale.
Similar to the previous report, tourism and hospitality
contacts across the District noted that while most hotels
and attractions reopened with limited capacity in order to
uphold social distancing measures, both revenues and
employment continued to be negatively impacted.
Construction and Real Estate
Prices
Housing demand across the District remained resilient
over the reporting period. Pending home sales soared as
low interest rates and pent-up demand increased housing activity. Many markets experienced supply shortag-
Over the reporting period, contacts continued to note
muted input costs and little to no pricing power. Increasing costs associated with personal protective equipment,
F-1
Federal Reserve Bank of Atlanta
es, which accelerated upward pressure on home prices.
Construction was unable to keep pace with the surge in
demand experienced by homebuilders. Higher home
prices, coupled with declining household incomes, continued to suppress home ownership affordability. Delinquencies remained elevated, especially in markets with
high concentrations of workers in the leisure and hospitality sector, such as in South Florida and Orlando.
Banking and Finance
Conditions at financial institutions rebounded slightly but
continued to be impacted by issues related to COVID-19.
Although requests for forbearance on loan payments
declined, financial institutions increased loan loss reserves in preparation for increased charge-offs as the
initial forbearance periods ended. Loan growth stalled,
and underwriting conditions tightened for a majority of
loan products. Compressed net interest rate margins,
along with higher provisions for loan loss expenses and
noninterest costs, continued to put negative pressure on
earnings. Liquidity remained strong due to high deposit
levels maintained by customers.
Commercial real estate (CRE) contacts reported that the
sector continued to encounter challenges associated
with the coronavirus pandemic. Contacts in hard hit
sectors like retail and hospitality reported that conditions
continued to stabilize as local economies improved.
Owners of lower-price multifamily properties reported an
increase in late rent payments and a softening in occupancies. However, some contacts reported a decline in
the number of tenants and borrowers seeking relief.
While improving, low levels of tourism and travel are
having a notable negative impact on activity across the
hospitality and retail sectors. Investment property sales
remained a fraction of pre-COVID levels. Contacts reported that capital was readily available at banks; however, underwriting criteria tightened for the financing of
stabilized CRE projects. Contacts reported that highquality asset values declined marginally, and hospitality
and retail sector assets declined at a more accelerated
rate.
Energy
Energy markets continued to face a great deal of uncertainty. Crude oil production remained restrained by oversupply and weak demand. Demand for natural gas declined further over the reporting period, as COVID-19
shutdowns reduced power usage across the commercial
and industrial segments. Refineries cut back throughput
and maintained historically low utilization rates amidst
muted demand. Reports indicated that delayed maintenance at refineries is expected to occur in the coming
months, which contacts expect to add strain to already
limited resources. District energy firms operating in areas
such as oil and gas production, petrochemical refining,
pulp and paper, and power continued to delay or halt
projects indefinitely and reduce headcount. In contrast,
renewables projects, including solar and wind farms and
renewable diesel production, remained active.
Manufacturing
While most manufacturing firms reported a modest acceleration in overall business activity compared with the
previous report, the level of activity remains slightly
below pre-COVID levels. While many contacts indicated
that new orders and production levels increased, reports
of subdued demand at some firms persisted. Purchasing
managers reported a slight increase in supply delivery
times and a decline in finished inventory levels. Expectations for future production levels increased, with nearly
half of contacts expecting higher levels of production
over the next six months.
Agriculture
Agricultural conditions remained weak. Drought-free
conditions prevailed in most parts of the District except in
Georgia, where much of the state experienced abnormally dry conditions. On a month-over-month basis,
July’s production forecast for Florida's orange crop was
unchanged from the previous month and remained below last year’s production, while Florida's grapefruit
production forecast was down from the previous month
but remained ahead of last year. The USDA reported
that in June, year-over-year prices paid to farmers were
up for rice and soybeans but down for corn, cotton,
cattle, broilers, eggs, and milk. On a month-over-month
basis, prices increased for cotton, rice, soybeans, broilers, and milk but decreased for corn and eggs while
cattle prices were unchanged. ■
Transportation
Transportation contacts indicated that demand was
generally consistent with the previous reporting period.
Activity at ports was mixed: some contacts noted continued softness in container traffic, while others reported
increased container volumes tied to e-commerce and
consumer goods. Exports of agricultural products such
as wood pulp, cotton, and peanuts rose, but coal exports
were down. Year-over-year total rail traffic declined, but
intermodal traffic increased slightly. Trucking firms saw
higher freight volumes, which contacts attributed to
inventory restocking and surging online sales.
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ August 2020
Summary of Economic Activity
Economic activity in the Seventh District again increased strongly in July and early August, but the pace of growth was
slower than the prior reporting period and activity remained well below its pre-pandemic level. Contacts expected further
growth in the coming months, but most did not expect a full recovery until at least the second half of 2021. Employment
and manufacturing increased strongly; consumer spending and construction and real estate increased moderately; and
business spending increased slightly. Wages increased slightly and prices rose modestly. Financial conditions also
improved modestly. The pandemic continued to weigh on agricultural incomes.
Employment and Wages
Consumer Spending
Employment overall increased strongly during the reporting period, though a large number of contacts made little
or no change to their staffing levels. One said that the
Paycheck Protection Program (PPP) had allowed his
firm to retain workers during the depths of the downturn
and was sparing them the difficulty of searching for
workers now that activity was picking up. A number of
contacts in manufacturing reported they were maintaining higher employment levels than usual because of
elevated rates of absenteeism as workers with a positive
COVID test or potential exposure had to quarantine.
Several contacts again commented that generous unemployment benefits had made it difficult to bring payrolls
back to desired levels, especially at the entry level.
Wages increased slightly across skill levels. Benefits
costs also moved up some.
Consumer spending increased moderately over the
reporting period, and sales in many sectors returned to
near their pre-pandemic levels. Nonauto retail spending
increased moderately. Contacts again reported robust
gains in electronics (particularly for items that support elearning) and sporting goods, but disappointing sales of
apparel and other traditional back-to-school items as
many schools were opting for virtual learning this fall.
Sales leveled off in the grocery and home improvement
sectors but remained well above year-ago levels. Vehicle
sales fell slightly from strong levels in the previous reporting period. Dealers said that low inventories of some
light truck models were holding back sales but supporting higher prices and profitability. Boats and RV sales
continued to be strong. Contacts in the leisure and hospitality sector reported large increases in volumes, especially at hotels and restaurants, but activity remained well
below its pre-pandemic level.
Prices
Prices rose modestly in July and early August, and contacts expected a similar-sized increase over the next 12
months. Consumer prices increased moderately on
balance, led by higher vehicle prices. Food and beverage prices fell a bit overall. Producer prices increased
slightly. Input costs were up modestly, driven by rising
raw materials and shipping costs.
Business Spending
Business spending increased slightly in July and early
August. Many retailers continued to struggle with inventory positions: one contact noted that nonessential retailers were being “careful on inventory” and did not want to
over-order, while others reported low inventories of light
trucks, boats, RVs, and many grocery items. Overall,
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Federal Reserve Bank of Chicago
manufacturers said inventories were somewhat higher
than comfortable, and a number continued to report
minor supply chain problems. Capital expenditures were
little changed, and many contacts said they had paused
expansion plans for the year. Freight transportation
increased modestly, but remained at a low level. Commercial and industrial energy consumption increased
modestly, with higher reported usage by small commercial establishments.
Banking and Finance
Financial conditions improved modestly on balance over
the reporting period. Participants in the equity and bond
markets reported better conditions, though volatility
remained elevated. Business loan demand decreased
moderately. Contacts noted that many businesses were
flush with cash because of the Paycheck Protection
Program (PPP) but were holding back on new capital
purchases. Business loan quality deteriorated moderately, with declines concentrated in leisure and hospitality,
retail, commercial real estate, and health care. Contacts
said that payment deferrals and the PPP continued to
help prevent delinquencies for many clients. Standards
again tightened modestly. Consumer loan demand increased modestly, led by strong home purchase and
refinancing activity. Loan quality improved slightly while
standards tightened slightly. Contacts noted that deferrals were limiting delinquencies in the consumer sector
as well. Contacts continued to report high levels of deposits for both businesses and households.
Construction and Real Estate
Construction and real estate activity increased moderately on balance over the reporting period. Residential
construction grew modestly, with increases in singlefamily suburban building. In contrast, residential real
estate activity increased substantially, with gains in most
segments. Contacts noted that low interest rates were
supporting demand. Many contacts said that demand for
larger living spaces had increased since the pandemic
began. Prices rose modestly, driven by low inventories of
single-family homes. Nonresidential construction increased on net, but activity remained slow. One contact
said that financing challenges and weak demand were
making it difficult for smaller construction firms to land
nonresidential jobs and that larger firms were exploring
taking on smaller projects. Commercial real estate activity decreased moderately, as demand for retail and office
space fell. Sublease space for those segments increased moderately. Demand for industrial space remained solid. Rents fell modestly overall. Sales of commercial properties were slow and prices fell modestly.
Some contacts said they were waiting for prices to fall
further before making purchases, and one contact said
that the gap between what buyers were willing to pay
and what sellers were willing to accept was unusually
large.
Agriculture
The agriculture sector continued to deal with lost income
due to COVID-19 related factors, though CARES Act
payments provided some support. In addition, a derecho
windstorm caused damage to crops (especially corn),
storage facilities, and livestock facilities in a number of
areas within the District. Parts of the District were also
experiencing drought. Still, contacts expected the corn
and soybean harvests to be near record levels for the
District as a whole. Corn prices were little changed at
levels below where they were a year ago, while soybean
prices rose and were above year-ago levels. Beef and
pork production was catching up from pandemic-related
reductions, and the backlog of cattle and hogs ready for
slaughter fell. One contact reported that a gap in the
supply of hogs was forming due to earlier euthanizations
of many baby pigs. Cattle and hog prices rose, but not
above year-ago prices. Beef and cheese prices moved
lower as supplies normalized. ■
Manufacturing
Manufacturing production increased strongly in July and
early August, but remained below where it was before
the pandemic began. Auto production again grew sharply, though the pace of growth was slower than the previous reporting period. Steel production increased moderately, led by increased demand from the auto and construction industries. Heavy machinery manufacturers
reported a slight decline in orders because of lower
demand from the mining and energy sectors. Sales at
specialty metals manufacturers increased modestly due
to growth in demand from the auto, medical, and food
manufacturing sectors. Demand for heavy trucks increased, but remained at low levels. Manufacturers of
building materials reported a modest increase in shipments.
For more information about District economic conditions visit:
www.chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ August 2020
Summary of Economic Activity
Reports from District contacts suggest economic activity has increased modestly, but losses sustained during the pandemic have yet to be fully recouped. Activity was also highly variable across sectors. Employment increased modestly
while wage growth was mixed. Auto dealers reported strong sales, and restaurants reported some improvement. Tourism and hospitality contacts reported that higher COVID-19 cases over the past month have reduced demand. The
outlook among contacts remains pessimistic but has improved slightly since our previous report. While some contacts
reported strong demand for their products and services, about half of contacts expect sales to return to pre-crisis levels
in less than 12 months and one-third of contacts expect it will take more than 12 months.
A significant share of contacts reported higher input
costs; however, many contacts continued to report lower
prices charged to consumers. Contacts noted increased
prices for lumber and other building materials. The increase in food costs is causing restaurants to increase
menu prices. Healthcare contacts noted that the costs of
personal protective equipment remain elevated. In contrast, certain goods experienced price declines since the
previous report. Contacts noted that prices for gasoline,
chemicals, crops, and livestock have declined.
Employment and Wages
The labor market has improved modestly since the previous report. Contacts across many industries reported
hiring or rehiring workers, though they frequently reported difficulty doing so, citing potential workers’ continuing
health concerns and childcare obligations. A manufacturing contact reported that it was challenging to hire
enough workers to staff half the plant’s usual number of
shifts. An employment agency stated that it was “not
uncommon” for those it matched to jobs to quit within 48
hours. Service, hospitality, and healthcare firms continued to report more mixed employment trends, as did
smaller firms. Some larger firms also reported laying off
furloughed workers in the face of slower recovery.
Consumer Spending
Consumer spending activity has been mixed since our
previous report. Seasonally adjusted credit and debit
card spending in early August increased or stayed the
same compared with average spending in July. General
retailers and restaurants reported mixed business activity over the past six weeks. Some retailers reported comparable or increased current-quarter sales compared
with last year, and restaurants indicated that business
has increased since they have been able to open up
fractional seating capacity; however, some retailers and
restaurants expressed concerns about their ability to
stay open. Most auto dealers reported strong sales,
some indicating year-over-year increases in currentquarter sales. Dealers cited that sales continue to be
bolstered by low interest rates, but their outlook for the
Wage growth has been mixed, with wages at small firms
remaining especially stagnant. On net, 15% of contacts
reported that wages were up since this time last year—
less than half the number who usually report such increases. Some firms reported increasing pay to attract
scarce workers: One peach farmer reported that a 10%
pay increase for his packaging workers still left him so
short-staffed he had to leave some of his crop unharvested.
Prices
Prices have increased slightly since the previous report.
H-1
Federal Reserve Bank of St. Louis
coming months is mixed due to an uncertain economic
outlook. Hospitality contacts reported that business
activity, which remains significantly below typical levels,
has declined since early July as reported COVID-19
cases have increased. Restaurants that cater to business-travel continue to struggle.
Contacts reported a continued shortage of housing on
the market and homes selling quickly once listed.
Residential construction increased modestly. Contacts
noted higher demand for new homes, with a contact in
Louisville noting that the shortage of housing inventory
contributed to demand for new home construction. However, builders reported higher costs and shortages of
input materials.
Manufacturing
Manufacturing activity has moderately increased since
our previous report. Multiple steel manufacturing contacts reported that they are now working at full capacity.
Plastics manufacturers in southern Indiana reported a
surge in production. Contacts in Louisville reported that
the automotive production continues to lag, but that most
automotive plants are in the process of resuming operations due to the resolution of supply chain problems.
Survey-based indices indicate that production, new
orders, and capacity utilization are on average still slightly lower than they were a year ago. On average, contacts expect production, new orders, and capacity utilization next quarter to be nearly back to their levels from
one year ago.
Commercial real estate activity has been mixed since the
previous report. Contacts reported a lack of demand for
retail and office real estate due to the pandemic. Contacts noted that existing tenants in retail spaces have
been struggling due to consumer concerns over safety.
Some contacts observed higher demand for industrial
real estate.
Commercial construction activity has been unchanged.
Construction activity has generally been sustained for
projects that were ongoing prior to the pandemic. Contacts reported little to no speculative building for office or
retail space and that uncertainty surrounding the pandemic has disrupted their ability to obtain and plan for
future projects.
Nonfinancial Services
Activity in the nonfinancial service sector has improved
slightly since the previous report. Airport passenger
traffic has nearly doubled month over month, although
levels are still down roughly 80% relative to this time last
year. Cargo traffic has remained stable, increasing moderately month-to-month and year-over-year. A logistics
firm was able to raise wages and expand its workforce.
Hospital contacts noted that in-patient and ambulatory
volumes have reached 90% of pre-crisis levels. However, hospitals indicate that they continue to deal with large
numbers of COVID-19 patients. As a result, research
remains sidelined and wholly devoted to COVID-19.
Moreover, fellowship and residency programs are temporarily on hold. Hospital contacts noted that furloughed
staff have begun to return in phases and hiring for physicians and nurses continues. Dentists and optometrists
have reported increased activity, as patients who delayed care are now seeking treatment.
Banking and Finance
Banking conditions have slightly worsened since the
previous report. Overall business loan demand slowed
after the surge of emergency lending through July. Consumer loan demand has increased, particularly for credit
cards. Low interest rates continue to spur stronger-thanexpected mortgage lending, refinancing, and new construction loans. Banks reported high levels of deposits
and increasing loan loss reserves. Overall delinquencies
have declined primarily in consumer products such as
credit cards, mortgages, and auto loans. However, bankers continue to express some concern for loans in the
leisure and entertainment industry.
Agriculture and Natural Resources
Agriculture conditions have improved slightly from the
previous reporting period. Relative to early July, the
percentage of District corn, rice, and soybeans rated fair
or better has increased slightly while the percentage of
cotton decreased slightly. Contacts indicated that, while
crop conditions look promising, low crop prices will reduce profitability and there is still concern over trade
disputes with China and the effects on commodity pricing.
Real Estate and Construction
Residential real estate activity increased slightly since
the previous report. Total home sales have improved
slightly since early July. Home sales in most of the largest District MSAs are up through early August relative to
the same period last year. Contacts cited high demand
for housing and low interest rates as drivers of sales.
However, a contact in St. Louis noted a recent downturn
in demand after record-breaking sales in the later
months of the second quarter.
Natural resource extraction conditions continued to fall
moderately from June to July, with seasonally adjusted
coal production decreasing 7%. Production is down 31%
from a year ago. ■
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ August 2020
Summary of Economic Activity
Ninth District economic activity grew slightly since the previous report, but remained well below its prepandemic benchmark. Employment was mixed, wage pressures fell moderately, and price pressures generally remained modest. The
District economy saw growth in consumer spending, tourism, manufacturing, residential construction and real estate,
and mining. Agriculture was mixed, while services, commercial construction and real estate, and energy declined.
Employment and Wages
Wage pressures continued to fall moderately overall
since the last report. The Districtwide survey of general
businesses found that most employers were holding
steady on wages, but more reported wage decreases
(30 percent) than those reporting increases (10 percent).
A small share of local governments has also reported
wage and other compensation cuts in the face of budget
shortfalls. However, wage increases were seen in certain
sectors. Staffing contacts reported slightly rising wages,
driven by manufacturing clients who were still seeing
good business. The Minneapolis Fed survey of
construction firms also found that one-quarter had raised
wages since the pandemic’s onset, while 10 percent had
cut wages.
Employment was mixed since the last report. Job
postings rose through mid-July in District states, and
staffing contacts in Minnesota confirmed that job orders
had been rising. However, there were signs of ebbing job
demand later in the month and into August. A Districtwide survey in late July by the Minneapolis Fed
suggested that more firms were cutting staff compared
with those adding workers. A second survey of
construction firms found that overall hiring sentiment was
slightly negative. Contacts in multiple District states said
that new job postings and hires have been skewed
toward those that directly produce income—sales,
manufacturing, construction—while administrative and
support positions have pulled back as firms try to remain
as lean as possible. Despite high unemployment, staffing
and other contacts nonetheless reported that unfilled job
orders have been rising. Firms looking for workers
reported difficulty in finding labor, particularly in sectors
like food and entertainment that were operating at
reduced capacity and faced the prospect of future
shutdowns. Initial unemployment claims across District
states in early August were modestly lower than a month
earlier, but still significantly above normal. In general,
many firms expressed concern about future demand and
its impact on staffing. A large professional services firm
in Minneapolis-St. Paul said, “I anticipate furloughs
becoming layoffs if some of our shelved work doesn't
start up.”
Prices
Price pressures remained modest, with some
exceptions. Nearly half of early respondents to a survey
of Ninth District professional services firms said input
prices increased over a year earlier; however, a majority
expected prices to remain flat over the coming 12
months. Structural lumber prices spiked since the last
report, as inventories dwindled in the face of strong
demand. Retail fuel prices in District states were little
changed over the reporting period. Prices received by
farmers in June increased from a year earlier for
soybeans, potatoes, dry beans, and turkeys, while prices
for corn, wheat, hay, cattle, hogs, chickens, and eggs
decreased; milk prices were unchanged.
I-1
Federal Reserve Bank of Minneapolis
Consumer Spending
in Minneapolis-St. Paul and St. Cloud (Minn.), Bismarck
and Fargo (N.D.), and Sioux Falls, S.D. But flat or lower
activity was reported in other regions.
Consumer spending was modestly higher since the last
report, but remained below prepandemic levels. Vehicles
sales were up. A dealership in the western portion of the
District reported strong year-over-year sales in July
across multiple locations. Motor vehicle sales tax
collections in Minnesota were also higher over this
period. Passenger traffic at the eight largest airports in
the District continued to increase modestly through early
August. However, total traffic remains at just 35 percent
of normal seasonal levels.
Commercial real estate slowed modestly. In Minneapolis
-St. Paul, vacancy rates in most segments have risen
modestly. Industrial space was called a “bright spot” by
one source. New, speculative construction has slowed,
but client-driven demand continued, particularly for new
manufacturing and distribution space. Leasing and sales
for office space has slowed, and several sources noted
some demand flight to the suburbs from downtown. New
senior housing projects were reportedly struggling to find
tenants. Residential real estate was moderately higher.
Most markets saw home sales rise in July—many by
double digits—over a year earlier, with the notable
exception of Minneapolis-St. Paul, where sales were flat.
Certain segments of tourism reported healthy activity.
Businesses catering to summer outdoor leisure reported
robust demand compared with earlier in the summer.
Sales of equipment and other products catering to this
market—recreational vehicles, bikes, ATVs, boats,
kayaks—were reportedly strong, but held back by low
inventories. But many retail shops, restaurants, and bars
continued to report only moderate demand even in the
face of restrained operating capacity. Hotel and
convention business remained dour with most large
business and social gatherings canceled. One notable
outlier was the annual motorcycle rally in Sturgis, S.D.
Attendance was down modestly from previous years, but
offered a spike in regional consumer demand.
Manufacturing
District manufacturing activity increased slightly since the
last report, though it remained below prepandemic
levels. An index of manufacturing activity indicated
expansion in Minnesota and South Dakota in July
compared with a month earlier, but decreased activity in
North Dakota. A producer of construction equipment
reported that while demand from the commercial sector
was down, it was offset by an increase in demand from
residential building. Food processors reported a similar
divergence between commercial and home demand.
Contacts reported that while they’ve remained busy with
backlogs through the pandemic, the pace of new orders
had declined, leading to concerns about conditions later
in the year and into 2021.
Services
Activity in the services sector decreased since the last
report. Preliminary results of a survey of District
professional services firms indicated that sales and
profits decreased for a majority of respondents
compared with a year earlier, and employment and
productivity fell slightly. Firms’ expectations for the
coming 12 months were more optimistic. Contacts in the
advertising and marketing fields continued to report
weakened demand as clients looked to cut budgets.
Demand for heavy equipment maintenance and repair
services was strong, according to several contacts.
Agriculture, Energy, and Natural Resources
District agricultural conditions were mixed. Lenders
responding to the Minneapolis Fed’s second-quarter
(July) survey of agricultural credit conditions
overwhelmingly reported decreased farm incomes in
their area relative to a year earlier, with a similar share
reporting decreased capital spending. Crops as of early
August were in strong condition in most areas of the
District, with some states on track for record or nearrecord production, but prices for most commodities
remained low. Activity in the energy sector decreased
further, while mining rebounded. District oil and gas
exploration held steady at subdued levels. The number
of drilling rigs in the District as of mid-August was
unchanged from a month earlier. Meanwhile, recent
North Dakota oil production fell well below its recent
peak. Most District iron ore operations that were closed
during the early stages of the pandemic have reopened.
■
Construction and Real Estate
Commercial construction was moderately lower since the
last report. A Districtwide survey of more than 600
construction firms found significant cancellations and
delays for both private and public projects. Firms
reported staying relatively busy by pulling future work
forward, but were also dealing with material shortages,
supply chain problems, and labor difficulties. There was
growing concern about new projects to bid on for the fall
and early next year. Residential construction was
modestly higher. While home building contractors
reported project cancellations and delays, there were
also more frequent reports of increased activity. July
residential permitting activity saw year-over-year growth
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ August 2020
Summary of Economic Activity
Tenth District economic activity continued to strengthen in July and August. Overall, the economy expanded moderately,
but activity in many sectors still remained below pre-pandemic levels. Consumer spending increased moderately as all
subsectors reported improvement. In the months ahead, retail and auto contacts expected growth to continue, while
tourism and restaurant contacts were more pessimistic. Manufacturing activity picked up, with both non-durable and
durable goods producers reporting higher levels of production and new orders. Durable goods activity remained well
below year-ago levels, but additional gains were expected in the next few months. Sales also picked up in the transportation, wholesale trade, and professional and high-tech sectors, and moderate growth was anticipated in coming months.
Residential real estate activity continued to increase at a moderate pace, but commercial real estate conditions worsened
further. Energy activity held relatively steady, but rig counts remained well below year-ago levels. The agriculture sector
remained weak, and the deterioration in farm income accelerated. District employment rebounded further in July and
August, but was still moderately below year-ago levels. Wages rose slightly, while overall input and selling prices increased at a modest pace.
Employment and Wages
vey and expected prices to continue to increase in the
months ahead. Retail input prices increased moderately,
while selling prices rose at a slightly slower pace. Restaurant input and selling prices continued to increase
significantly, but the pace of increases moderated compared to the previous survey. Restaurant prices were
above year-ago levels and were expected to continue to
rise in the coming months.
District employment increased modestly since the last
survey period but remained moderately below year-ago
levels. The biggest gains were in real estate, transportation and tourism sectors, but despite these gains, tourism and transportation employment was still well below a
year ago. Manufacturing, wholesale trade, and professional and high-tech employment rose modestly for the
first time since declining this spring. Overall employment
expectations improved in August, with manufacturers
expecting moderate gains and services contacts expecting slight gains in the months ahead.
Consumer Spending
Consumer spending increased moderately since the last
survey period but remained modestly below year-ago
levels. Sales rose for auto, retail, restaurant, and tourism, with retail sales moderately above a year ago, driven by strong grocery and home improvement sales over
the past few months. While restaurant and tourism activity showed a moderate rise compared to the last survey,
activity was still strongly below year-ago levels. More
than half of retail, restaurant, auto, and tourism contacts
reported that stimulus funds had a major positive effect
on their businesses in recent months. Expectations were
mixed. Contacts in the health services, retail, and auto
sectors predicted moderate gains in the months ahead,
while restaurant and tourism contacts anticipated declines.
Respondents were split regarding labor shortages, with
many reporting a need for truck drivers, mechanics, and
restaurant workers. Wages rose slightly, and modest
gains were expected in the coming months.
Prices
Input and selling prices rose modestly in July and August
and were expected to continue to do so in the next few
months. Prices for raw materials and finished products in
the manufacturing sector increased modestly, and expectations were for similar gains in the coming months.
Transportation input prices rose moderately and selling
prices increased slightly, but were still modestly below
year-ago levels. Construction supply respondents noted
a moderate increase in selling prices since the last sur-
Manufacturing and Other Business Activity
Manufacturing activity expanded for the second consec-
J-1
Federal Reserve Bank of Kansas City
utive survey period, and strengthened in August to a
moderate pace of growth. Gains in the non-durable
goods sector outpaced those in the durables goods
sector, but contacts in both sectors noted positive
growth. Production and new orders increased robustly in
the non-durable goods sector, leading to overall activity
levels that were slightly above a year ago. Production
and new orders rose modestly in the durable goods
sector, but activity remained moderately down from yearago levels. Many respondents indicated that if government support were to diminish in the next six months,
more furloughs or layoffs would be needed. Expectations
rose moderately regarding production and new orders,
but capital expenditures were expected to remain roughly flat.
installment loan demand. Respondents indicated loan
demand for commercial real estate held steady, while
demand for agricultural loans declined modestly and
commercial and industrial loans fell moderately. Credit
standards tightened in all categories, with a modest
tightening in commercial real estate and commercial and
industrial loans and slight tightening in residential real
estate, consumer installment, and agricultural loans. In
comparison to a year ago, loan quality decreased somewhat, and bankers expected loan quality to continue
decreasing over the next six months. Deposit levels rose
at a moderate pace since the last survey.
Energy
District energy activity held relatively steady since the
previous survey period, but was much lower than levels
of activity in August 2019. Revenues and employment
continued to decline, but the number of active oil and
gas rigs in the District was mostly unchanged. Rig levels
remained significantly below year-ago levels. Firms shutin wells earlier this year, and indicated no immediate
plans to bring more production capacity back online until
the oversupply of oil and gas wanes and prices increase.
Despite most regional energy firms taking advantage of
the SBA PPP loan program, expectations for future
drilling and business activity remained subdued. Continued uncertainty was a key factor inhibiting future capital
expenditures.
Outside of manufacturing, sales in the transportation and
wholesale sectors increased moderately compared to
the last survey. Sales in professional and high-tech
services showed modest improvement but remained
moderately below year-ago levels. Contacts in wholesale
trade, transportation, and professional and high-tech
services sectors expected moderate increases in sales
in the coming months. Expectations for capital expenditures were mixed across sectors.
Real Estate and Construction
Residential real estate conditions picked up moderately
in July and August, while commercial real estate showed
continued declines. Residential real estate experienced
moderate increases in home sales and prices, with all
respondents reporting stronger activity than a year ago.
Construction supply sales continued to increase slightly,
and expectations for future sales rose for the first time
following declines in the spring. Home inventories decreased moderately and remained low, but contacts
expected residential real estate activity to expand further
in the coming months. Commercial real estate conditions
continued to worsen as absorption rates, prices, rents,
and sales fell since the previous survey period and remained moderately below year-ago levels. Commercial
construction declined modestly, and contacts indicated
that the slowdown in commercial construction may be
accelerating. Additionally, access to credit remained
difficult, and more respondents indicated higher vacancy
rates. Commercial real estate contacts anticipated conditions to worsen in the next few months.
Agriculture
Weak conditions in the Tenth District agricultural economy persisted, and farm income deteriorated further. The
effects of the COVID-19 pandemic continued to constrain prices of key agricultural commodities, and profit
opportunities remained limited. Prices for major crops
and livestock increased slightly from the prior reporting
period, but remained below pre-pandemic levels.
Drought in the western portion of the District could further reduce revenues for some producers. Dry conditions
were most prevalent in Colorado, where nearly 30 percent of corn acres had poor or very poor quality through
mid-August. Alongside lower revenues, farm income
across all states in the District declined at a noticeably
faster pace than the prior survey period. ■
Banking
Since the last survey, bankers reported a slight increase
in overall loan demand. Increases were concentrated in
two categories, with strong increases in residential real
estate loan demand and slight increases in consumer
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ August 2020
Summary of Economic Activity
Increasing COVID-19 infections in the Eleventh District have disrupted the budding economic recovery in some sectors
and is the biggest risk to the near-term outlook. While manufacturing activity continued to expand and loan volumes
increased in the financial sector, service sector activity declined overall in July but resumed its nascent recovery in
August. Retail sales fell steeply in July but stabilized somewhat in August. Energy activity remained depressed. Activity
in the housing market was a bright spot, with home sales rising sharply. Employment remained fairly stable, according
to contacts. Input costs rose modestly while selling prices were flat to down. Outlooks were increasingly uncertain, with
numerous contacts expressing concern over surging COVID-19 cases and the resulting disruption to business.
food manufactures noted a deceleration from previous
months. Refiners noted that consumption of motor fuels
had improved, but profit margins remained depressed.
Manufacturing was still below normal levels, according to
nearly three-fourths of contacts. They reported that July
revenues were off by more than 30 percent from a typical July, on average.
Employment and Wages
Most contacts reported steady employment, though
there were some reports of either layoffs or increased
headcounts. Employment declines were centered in the
energy industry and parts of the service sector. Manufacturing jobs recovered somewhat as more firms noted net
hiring than noted net layoffs for the first time since January. Jobs grew in health care and professional and business services, while contacts more often noted employment declines in retail, leisure and hospitality, and transportation services. Energy contacts said more layoffs are
coming, but that the worst is likely past.
Outlooks remained positive, and most manufacturers
expect increased demand and production six months
from now.
Retail Sales
Retail sales fell steeply in July but stabilized somewhat
in August. Wholesalers also noted declines, though not
as pronounced. Auto dealers said sales were constrained by short inventories due to factory shutdowns or
bottlenecks. One contact noted that they were not expecting normal new-vehicle inventory until September or
October.
Wage growth accelerated slightly in August; however,
airlines and energy firms among others noted pay freezes and/or cuts.
Prices
Input costs rose at a moderate pace, except in oilfield
services where costs were down 10-20 percent versus
early-2020 contracts. Fuel costs have crept up and
lumber prices have doubled since earlier in the year.
Selling prices were largely flat.
Just over three-quarters of retailers said July revenues
were below normal, by about 22 percent on average.
More than half of retailers said supply chain disruptions
were restraining revenues, in addition to weak demand.
Expectations for future activity declined substantially,
and uncertainty rose sharply.
Manufacturing
Manufacturing activity continued to recover, expanding
moderately in July and August. Growth was led by high
tech and construction materials manufacturing, while
K-1
Federal Reserve Bank of Dallas
by a sharp rise in residential real estate lending. Commercial real estate lending stabilized after falling over the
prior three periods, while commercial and industrial and
consumer loan volumes continued to decline. Loan
pricing fell further, and credit standards and terms continued to tighten. Another significant increase was seen
in loan nonperformance, and nearly three-quarters of
bankers expect further increases in loan defaults. Contacts report that 11 percent of loan volumes are currently
on payment deferral due to COVID-19, on average,
down slightly from the prior period. Requests for loan
modifications were most prevalent among businesses in
accommodation and food services as well as real estate
and rental and leasing.
Nonfinancial Services
Service sector activity declined overall in July after a
short-lived expansion in June, but modest growth resumed in August. Face-to-face contact industries, such
as leisure and hospitality, suffered as new COVID-19
cases rose sharply in Texas in July. However, while
hotels have been hit hard, the single-family vacation
rental market has been very strong. Airlines continued to
struggle, with demand down 75 percent from a year ago
according to multiple contacts, who also noted that business travel is virtually nonexistent. Colleges and universities across the district face logistical and financial
challenges as they shift their fall semesters to a partially
virtual environment with limited on-site learning and
experience reduced enrollment. Some industries, like
professional services, were less affected by COVID-19
trends and saw increased revenues in both July and
August. Staffing contacts noted demand was stable
recently but down year over year.
Outlooks were more pessimistic, with expectations for
future loan demand turning slightly negative. Also, bankers voiced concern over the uncertainty about the PPP
forgiveness process and that it could become arduous.
Energy
Roughly three-quarters of contacts said July revenues
were below normal, by just over 30 percent on average.
This magnitude of the shortfall was higher for leisure and
hospitality firms, who said July revenues were off 46
percent, on average.
The Eleventh District rig count continued to erode over
the reporting period, though well completion activity
ticked up. Contacts continued to express a grim outlook.
The recent increase in COVID-19 trends in parts of the
U.S. and elsewhere is putting downward pressure on
expectations for oil prices and fuel consumption. Contacts said it is unlikely that oil prices will reach above $50
per barrel anytime soon, which is roughly the average
price at which Eleventh District firms need to profitably
drill new wells.
Outlooks worsened in July but improved in August,
though uncertainty continued to climb, particularly regarding COVID-19 and the presidential election. When
asked how likely it is that their business will permanently
shut down within the next 12 months, 90 percent of
contacts said it is not likely. Among leisure and hospitality firms, though, more than a quarter say it is at least
somewhat likely their business will not survive to next
July.
Agriculture
Soil moisture conditions deteriorated across the western
part of the district, where drought conditions intensified.
Grain harvesting progressed and yields were fairly normal, though prices remained unprofitably low. Cotton
prices inched higher over the past six weeks as demand
exceeded expectations, though prices were still below
break-even levels without government price supports.
Cattle and dairy prices trended higher. ■
Construction and Real Estate
Activity in the housing market was a bright spot. Existinghome sales climbed sharply in July and remained solid in
early August. Home builders continued to note widespread strength in sales. Contacts said record-low mortgage rates were driving sales, and inventories remained
very tight for both resale and new homes. Builders noted
strong sales have enabled them to raise prices. New
development was active, and outlooks were optimistic.
Apartment leasing improved further in July, but rents
were flat to down compared to year-ago levels and concessions have increased, particularly in areas where
there is a lot of new product. Office leasing activity was
modest and sublease space has increased. Industrial
demand remained solid.
Financial Services
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
Loan volume increased over the past six weeks, driven
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ August 2020
Summary of Economic Activity
Economic activity in the Twelfth District expanded slightly on balance during the reporting period of July through midAugust. Employment levels increased marginally, but hiring was curtailed by firms’ cost-containing efforts. Wages were
generally stable, as was price inflation. Sales of retail goods rose slightly, while conditions in the consumer and business services sectors remained precarious. Manufacturing activity increased modestly. Weak conditions persisted in the
agriculture sector. Residential real estate activity increased at a brisk pace, while activity in the commercial market
picked up a bit. Lending activity ticked up further.
Employment and Wages
Prices
Employment levels increased marginally on net, but
many employers curtailed hiring efforts to control costs in
the challenging economic environment. Some metal and
wood manufacturing facilities returned to operating fulltime and added workers due to increased demand. A
large transportation and logistics services provider increased entry-level job recruiting but froze manager
searches. Most health-care and financial services providers noted restrictions on new hiring and overall flat employment levels, though a payment-processing firm in
the Pacific Northwest reported actively hiring for several
positions. Restaurants increased staffing modestly over
the reporting period, but the tourism and entertainment
industries noted persistently low employment levels.
Some manufacturers expressed difficulties in finding
skilled labor. Contacts in the agriculture sector also
noted dwindling availability of immigrant workers, reducing the supply of unskilled labor. A few employers reported increased use of flexible schedules, or in some cases
absenteeism, due to concerns about COVID-19 exposure, childcare, or schooling alternatives.
Inflation remained stable over the reporting period, on
balance. Increased demand for logistics and transportation services resulted in additional surcharges designed
to offset the cost of volume increases and greater dispersion of routes. Similarly, prices for metal products and
building supplies strengthened on the back of recent
additional demand. Food prices continued to climb at
grocery stores, but prices declined slightly at restaurants
and retail stores in an attempt to spur business. Some
financial and business services providers either reduced
or eliminated some types of fees because of lower demand. Contacts in other sectors such as health care,
utilities, and machine supplies and repairs reported little
to no changes in prices.
Retail Trade and Services
Retail sales rose slightly over the past six weeks, following a large bump in May and June when restrictions on
nonessential businesses initially eased. Foot traffic to
brick-and-mortar establishments decreased only slightly
from end-June levels, while growth in e-commerce remained robust. Demand for do-it-yourself home materials soared, and sales of some specialty goods, for example bicycles and pet products, were on par with those
from a year ago. Auto dealers reported continued high
demand and lean inventories for both new and used
vehicles, especially light trucks and SUVs. Retailers in
some other sectors, such as apparel, mentioned reduced
sales, operating hours, and capacity utilization, attributing the cutbacks to increases in COVID-19 cases and
adherence to social-distancing guidelines.
Wages remained flat overall. Most employers reported
unchanged wages over the reporting period, partially due
to cost containment efforts and uncertainty. In California
and Oregon, wages at the bottom of the distribution saw
a slight increase due to the implementation of new minimum wage regulations in July. Building materials manufacturers in California and the Pacific Northwest reported
reinstating cost-of-living wage adjustments, retracting
previous wage cuts, or offering widespread wage increases due to a brisk increase in demand. Conversely,
some retailers eliminated hazard pay bonuses for their
employees.
Conditions in the consumer and business services sectors remained precarious. Sales remained strong in
L-1
Federal Reserve Bank of San Francisco
select markets, including logistics and delivery services,
meeting technologies, and tax preparations. However, the
bulk of food service, travel, and hospitality providers
continued to operate at a fraction of their capacities and
saw the bump in sales in late spring reversed during the
current reporting period. Restaurants that have been able
to continue operations reported weak sales, reduced
seating, and dire prospects for the immediate future.
Some have adapted by exclusively offering take-out
service and operating straight from their kitchens. Air
travel remained subdued with one airport in Southern
California welcoming only 9 percent of its typical prepandemic monthly level for domestic passengers and
virtually no international arrivals. Hoteliers in Southern
California, Washington, and Hawaii reported lower booking volumes and occupancy rates, though those in Southern California performed somewhat better compared with
the rest of the District. Demand for nonurgent legal services, elective health procedures, and live event-based
entertainment remained soft, as clients socially distanced
and postponed discretionary expenditures.
grapes, apples, and cherries to grocery stores and lumber to retailers and contractors increased notably over
the reporting period. Export demand was weak, with
producers in California and the Pacific Northwest highlighting poor sales to Asian markets across a variety of
products, including nuts and lumber.
Real Estate and Construction
Residential construction activity increased at a brisk
pace, supported by the low interest rate environment.
Contacts reported increased demand for new single and
multifamily homes in most areas, which helped boost
permit issuance across the District. Existing inventories
remained low, and prices climbed further as many buyers placed competing bids on desired homes. Workers
continued to seek opportunities to move away from
major metropolitan areas as some jobs become more
conducive to teleworking. In the Mountain West and
Pacific Northwest, homebuilders reported having trouble
keeping up with demand, and pointed to the increasing
costs of building materials and supply chain disruptions
as their main constraints. Some parts of California saw
less building activity and delayed permit issuance, as
many local government offices remained closed.
Manufacturing
Manufacturing activity increased modestly over the reporting period, but remains considerably below prepandemic levels. Demand for recycled metals and finished steel products strengthened as auto production and
construction continued to pick up, though capacity utilization rates remained at about three-quarters of their yearago levels. Building materials manufacturers have also
benefited from increased construction activity, with a
wood product manufacturer in the Pacific Northwest
reporting many sawmills returning to normal working
hours or even overtime. Energy usage by manufacturers
across the District also rebounded, while a renewable
energy equipment producer in California mentioned pentup demand for its domestic output. Some manufacturers
reported more challenging conditions depending on industry, raw material availability, and severity of supply
chain disruptions.
Activity in the commercial real estate market picked up
slightly, on net. Demand for new office space and hotel
rooms remained soft, diverting construction into other
commercial sectors. Existing commercial projects resumed, and new demand for industrial and warehouse
space kept permitting high relative to pandemic-induced
lows. A contact in Utah reported large investments in
commercial properties including an airport, a convention
venue, and an office tower.
Financial Institutions
Overall lending activity ticked up further. Contacts noted
a shift in loan demand toward home mortgages, auto
loans, and standard commercial loans as PPP activity
wound down. Bankers reported that new and refinanced
mortgages drove the bulk of business over the reporting
period, as households took advantage of low interest
rates. Loans to agricultural businesses were weak, but
demand from builders was robust. Bankers highlighted
solid liquidity conditions and strong capital positions as
well as double-digit increases for deposits in some areas. Some contacts noted a decline in lending standards,
which reduced credit quality and could increase delinquencies in the coming months. A contact in Arizona
reported limited service hours due to COVID-19-related
precautions, delaying deliveries of financial services. ■
Agriculture and Resource-Related Industries
Conditions in the agriculture sector remained weak overall. Yields and quality of grain, fruit, and nut crops were
high. In the Mountain West, bumper wheat crops contributed to already bulging inventories from previous harvests. General production and distribution were constrained by COVID-19-related supply chain disruptions
and additional expenses incurred to adhere to socialdistancing guidelines at farms and processing centers.
Domestic demand remained mixed overall, but sales of
L-2
Cite this document
Federal Reserve (2020, September 15). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20200916
@misc{wtfs_beige_book_20200916,
author = {Federal Reserve},
title = {Beige Book},
year = {2020},
month = {Sep},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20200916},
note = {Retrieved via When the Fed Speaks corpus}
}